G.R. No. L-9438; November 25, 1914
PAULA MARTINEZ, plaintiff-appellee, vs. VICTORINO BAGANUS, defendant-appellant.

FACTS:
Paula Martinez was the owner of a lot in Balayan, Batangas, having purchased it in 1890. On March 15, 1909, her son, Jose Mojica, sold the same lot to Victorino Baganus for P70. On May 22, 1913, Paula Martinez filed an action to recover ownership and possession of the lot, seeking a declaration that the sale by her son was null and void. The defendant, Baganus, claimed he purchased the lot in the belief it belonged to Jose Mojica, and that he had made improvements worth over P1,000, including constructing a house, a carriage shop, and planting fruit trees. The trial court (through a delegated justice of the peace) declared the sale null and void, ordered Baganus to return the lot and remove his improvements at his own expense, and reserved Baganus’s right of action against Jose Mojica.

ISSUE:
Whether the defendant, Victorino Baganus, having built and planted on the land in bad faith, is entitled to reimbursement for his necessary and useful improvements, given the plaintiff-owner’s own bad faith in failing to promptly object to the constructions and plantings.

RULING:
The Supreme Court affirmed the declaration that the sale by Jose Mojica was null and void. However, it reversed the portion of the trial court’s judgment ordering Baganus to return the lot and remove his improvements without compensation. The Court found that while Baganus was in bad faith for purchasing from a non-owner, the plaintiff, Paula Martinez, was also in bad faith under Article 364, paragraph 2 of the Civil Code, as she tolerated the constructions and plantings on her land for years without objection. Applying Article 364, paragraph 1, the rights of the parties are to be determined as if both had acted in good faith. Consequently, pursuant to Article 361 of the Civil Code, the plaintiff has the option to: (1) appropriate the improvements after indemnifying the defendant for their necessary and useful value, or (2) compel the defendant to pay the value of the land. The defendant retains the right of retention until reimbursed for the improvements. The Court reserved Baganus’s right of action against Jose Mojica for warranty of the sale. No costs were awarded for the appeal.